There Goes the Neighborhood

What happens to your home’s value when a registered sex offender moves in next door?

Sex offenders affect not only the value of adjacent properties, but the value of other homes nearby

Photo by Rick Wilking/Reuters

Parents in Pennsylvania are trying to force a neighbor who sexually assaulted their daughter to buy their home. After the man next door was convicted of a sex crime, the family says, the house has become difficult to sell. How much does your property value drop when a registered sex offender lives next door?

About 12 percent. According to a study released in 2008, houses located next door to a registered sex offender drop by that much in value. For the average American homeowner, that’s a loss of nearly $21,000, enough money to send a child to private school for two years. The family in Pennsylvania claims the home is worth $235,000 without a sex-offender neighbor, so the loss in value has likely surpassed $28,000.

The Pennsylvania family is probably overreaching in its claim that the home is “virtually unmarketable.” Homes located next to registered sex offenders sell all the time—otherwise, a convict’s effect on property value would be nearly impossible to study. Plus, it’s becoming increasingly difficult to keep away from sex offenders. As of January 2012, there were 747,408 registered sex offenders in the United States. California has the largest number of registered sex offenders with more than 106,000, but because of its size, California has the largest number of almost everything. Arkansas has the greatest per capita concentration of sex offenders, with a total of 10,051 people on the state’s registry. Assuming that the overwhelming majority of those offenders are adult males, that means 0.9 percent of the adult males in the state are sex offenders. So if you buy a home in Arkansas with one man living in each of the houses on either side, there’s a 1.8 percent chance you’ll be living next to a registered sex offender.

The picture gets even bleaker when you consider that sex offenders affect not only the value of adjacent properties, but the value of other homes nearby. On average, homes within a 0.1-mile radius of a registered sex offender drop in value by 4 percent. If you buy a home in a typical Arkansas subdivision with 10 homes within 0.1 miles of your own, and each of those homes includes one adult male, there is an 8.6 percent chance that a sex offender will be close enough to depress your home’s value. (Sex offenders have no measurable effect on the value of homes more than 0.1 miles away.)

Here’s the good news: When a sex offender leaves, homes in the neighborhood rebound to fair market value almost immediately. So if you’re looking to speculate on real estate, a viable strategy is to buy a house next door to a sex offender and wait him out. You might get a quick 12 percent bounce without having to spiff the place up.